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James Foley 'beheading' video released

Islamic State militants claim to have decapitated US journalist James Foley, and threaten to kill another US journalist, Steven Sotloff, missing since last year. (This report does not show the alleged execution)

Just hours after the United States announced it would begin air strikes on militants in the north of Iraq, a propaganda video from the Islamic State emerged online with the warning: "We will drown you in blood."

That was on August 17 and by Tuesday, after more than 70 air strikes from US fighter jets and drones - launched, President Barack Obama said, to protect besieged minorities trapped by Islamist militants as well as its own strategic interests in Iraq - the Islamic State appeared to have made good its threat.

Another propaganda video appeared overnight, this one showing the gruesome beheading of American journalist James Foley, in retaliation, his executioner says, for the air strikes in Iraq.

Murdered by militants: Journalist James Foley. Photo: AP

Speaking English with a British accent, the masked executioner identifies a second journalist, believed to be Steve Sotloff, and warns: "The life of this American citizen, Obama, depends on your next decision."

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Suddenly, President Obama's announcement on Monday that Iraqi and Kurdish forces, with US air support, had retaken the strategic dam north of Mosul from Sunni militants took on new meaning.

Foley, 40, went missing in near the northern Syrian town of Taftanaz while freelancing for Global Post and Agence France-Presse in November 2012. Sotloff has been missing since last August.

On target: Smoke rises following US air strikes on Islamic State militants at Mosul Dam on Monday. Photo: AFP

The journalists were just two of at least 20 reporters – local and international – that the Islamic State is holding, as well as several teams of aid workers, human rights groups estimate.

The significant number of foreign hostages under its control provides the Islamic State with "immensely dangerous leverage", visiting fellow at the Brookings Doha Center in Qatar, Charles Lister said.

"Despite being framed as 'punishment' for US airstrikes, IS is baiting Obama to retaliate and expand [US] horizons to Syria," Mr Lister commented on Twitter.

Destruction: Peshmerga fighters inspect the remains of a car that belonged to Islamic State militants in Baqufa, north of Mosul. Photo: AFP

At the moment, the Islamic State looks to be an almost unbeatable force in north-eastern Syria and Iraq, Mr Lister warns.

"Neither the Syrian or Iraqi governments, the Kurds, other armed groups, or Western governments appear to have the capability or urgency or backbone to implement the decisions and actions necessary to begin a long-term process of fighting back," he wrote in the Huffington Post this week.

Shiraz Maher, a senior research fellow at the International Centre for the Study of Radicalisation and Political Violence, told Fairfax Media the fact that IS felt it could directly address the US President indicates how much influence the group believes it already has in Syria and Iraq.

Message: A Kurdish fighter pulls down a flag belonging to Islamic State militants at the Mosul Dam on Tuesday. Photo: Reuters

"The video was very clearly directed towards Obama," Mr Maher said. "They were saying: 'The fate of this man [Sotloff] is in your hands - we want you to stay out of our internal affairs, we don't want you to have any form of any involvement in Iraq'.

"It is an incredibly powerful move from them - to address the most powerful leader in the world in that way shows you how they see themselves."

The Islamic State had seemingly been given "free reign to do whatever they like in Syria and now in Iraq", he said, and the US military commitment in Iraq is still very narrow.

Mr Maher expects that IS will continue to fight to acquire new territory and consolidate what they already have, and says there is no doubt they will gain some new followers with the release of the horrific execution video.

"To the ordinary person these things are horrific - but to the people interested in ISIS or who are wanting to join or committed to it, this kind of event emboldens them," he said.

In the video posted on YouTube, then later removed, Mr Foley is forced to recite a statement against the US actions in Iraq, specifically addressing his brother John, a US soldier.

"I died that day John, when your colleagues dropped that bomb on those people they signed my death certificate," Foley says, under knifepoint.

His executioner goes on to say: "Today, your military air force is attacking us daily in Iraq, your strikes have caused casualties among Muslims. You're no longer fighting an insurgency, we are an Islamic army."

"Any attempt by you Obama to deny the Muslims their rights of living in safety under the Islamic caliphate will result in the bloodshed of your people."

Both journalists were wearing orange jumpsuits similar to those worn by detainees in the controversial offshore US prison at Guantanamo Bay in Cuba.

Foley's family, who have campaigned tirelessly for his release, issued a heartbreaking statement hours after the video was posted, thanking their son "for all the joy he gave us" and describing him as an extraordinary journalist.

"We have never been prouder of our son Jim," his mother Diane said. "He gave his life trying to expose the world to the suffering of the Syrian people."

"We implore the kidnappers to spare the lives of the remaining hostages. Like Jim, they are innocents. They have no control over American government policy in Iraq, Syria or anywhere in the world."

There is yet to be a formal statement from President Obama. The US National Security Council spokeswoman, Caitlin Hayden, said in a statement: "We have seen a video that purports to be the murder of US citizen James Foley by ISIL. The intelligence community is working as quickly as possible to determine its authenticity. If genuine, we are appalled by the brutal murder of an innocent American journalist," she said.

The British Foreign Secretary Philip Hammond said "all the hallmarks point to it [the video] being genuine".

It was not Mr Foley's first kidnapping: in 2011, he was taken in Libya while reporting on the uprising against Libyan dictator Muammar Gaddafi and released after six weeks in captivity.

The Islamic State - formerly known as the Islamic State of Iraq and the Levant (ISIL) or the Islamic State of Iraq and al-Sham (ISIS) - is the most powerful of the al-Qaeda-related groups to enter the brutal Syrian war that has killed more than 170,000 people since March 2011.

After taking control of many towns in north eastern Syria, fighting not just against the soldiers loyal to Syrian President Bashar al-Assad but against the rebels trying to overthrow his brutal regime, the Islamic militants stormed across the border and took the northern Iraqi city of Mosul on June 9.

Since then they have gained control over Tikrit and other towns to the north of Baghdad, declaring a self-styled Islamic caliphate in an area that crosses the Iraq-Syria border.

They have imposed a harsh interpretation of Islamic law, killing hundreds of civilians, soldiers and fighters including many who were beheaded in the northern Syrian city of Raqqa, their heads later displayed in the town's square.